Diversification or ETF’d to Death?

One of the biggest lies flaws about investing in ETF’s is how you get diversification.  Or what we call ETF’d to death.

That’s not to say that they are bad investments.

We are merely pointing out the misleading idea about diversification.

 

Far too many “expert advisors” encourage you to spread your money among numerous ETFs for safety reasons.  (Even Warren Buffet thinks the “little guy” should buy them).

 

But here is the problem.

The vast majority of the gurus touting ETF’s DID NOT make their fortunes from them.

 

However, they continue to make their fortunes by telling YOU to buy them.

 

Huh?

 

Guys like Warren Buffett want you to buy ETFs because he owns large positions in both Blackrock and Vanguard.

 

And the largest issues/managers of ETFs in the world just happen to be Blackrock and Vanguard.

 

Do the math.

The more people buy ETFs, the more money Blackrock and Vanguard make…and the more money Buffett makes as their stocks go up.

 

 

It is called the shampoo bottle method of investing for the little guy.

And like the back of the bottle says:  Wash, Rinse, Repeat is a cycle consistently used by the Boyz in the “Club” to fleece the sheeple.

 

There are supposedly laws against this, but…

 

 

 

 

Diversification or…

 

Let me give you an example.

Years ago, one of Wall Street’s huge money-making schemes used a similar strategy of diversification using mutual funds.

They would package a group of funds (based on your “risk tolerance”) and charge you a fee for managing them.

 

The big problem was most of the funds held a lot of the same stocks.  (So much for diversification).

And to make matters worse, when the “managers” adjusted their portfolios, they would trade internally among themselves.

Behind the scenes they’d say to each other, “Hey, Louie. I need to unload some dogs in my fund.  So, if you take them from me, I’ll return the favor to you.”

This was how they justified charging you a “Wrapped Fee” in addition to the management fees.

 

Today’s ETF’s play by the same rules.  (Albeit the fees are lower)

You want proof?

 

• Start by looking at the similarity of the holdings/diversification among your ETF’s.
• Look at how the managers trade among themselves.
• Remember that very few “big players” made their fortunes by diversifying among so many different stocks.

 

Bottom line here?

Stop being Wall Street’s victim and learn how to beat them at their own game.

And for more ideas on how to beat them at their own game be sure to read “Simplifying Wall Street…In Plain English” (HERE).

 

Share this with a friend…especially if they own a lot of ETFs.  They’ll thank YOU later.

 

And tell them:

 

We’re Not Just About Finance

But we use finance to give you hope.

Support always welcome via the digital tip jar.

 

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